Capital Market Players: Households, Individual Investors, and Non-Profit Organizations

Category Overview

Individual Investors

Households are the ultimate owners of capital

Individuals are the ultimate investors, owning most financial assets directly, in their own name, or indirectly in the name of funds, trusts, or corporations.

Overview: Capital Market Players: Households, Individual Investors, and Non-Profit Organizations

For most of the population, investment is a way of saving for retirement or for the education of children.

The investment strategies of the Non-Rich, the Rich, and the Super-Rich are quite different, as are the needs of young and old investors.

The motivation of individual investors is complex, but depends primarily on accumulated wealth and age.

Over ninety-five percent of the population lacks sufficient wealth to justify speculative investments.

Changing demographics, especially the aging of world populations, will continue to play a dominant role in shaping the capital market in the 21st century.

Many Believe The Common Stock Legend

Individual investors often believe that common stock, held for the long-run, is the best investment.

Reliance on this Common Stock Legend, and the reduction in the supply of equities caused by corporate buybacks, has forced stock prices well above long-term norms.

In the next generation, Baby Boomers, will retire and sell equity holdings to a smaller, succeeding generation.

This may put the Common Stock Legend to the test.

Individuals are the ultimate investors

America: A Nation of Employees

In the 1860s, two-thirds of Americans were self-employed, usually on the family farm.

Over the last one-hundred fifty years, the occupation of Americans has changed from self-employment to wage earners.

Today, only from five to ten percent of Americans are self-employed.

Most people are employees in a system of Workers' Capitalism.

The decline in entrepreneurship and owner-managed companies is linked to a growing shortage of equities.

The Trade Deficit: Some Benefit, Some Don't

For forty years, Americans have benefited from the dollar's position as an international reserve currency.

In the last two decades, an increasing trade deficit has given U.S. households easy financing, while globalization has delivered low-cost imported goods.

However, deindustrialization, spurred by an asset-lite philosophy and linked to the trade deficit , has stalled economic progress in the less fortunate segment of the population, increasing the gap between rich and poor.


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